Optical components

Avanex Shutters a Site

The closing of a Melbourne, Fla., facility is just part of an ongoing restructuring effort at optical components vendor Avanex Corp. (Nasdaq: AVNX) and not a sign of a major change in product plans, CEO Giovanni Barbarossa tells Light Reading.

Avanex is closing the Melbourne facility and laying off 47 employees, part of an ongoing cost-cutting program at the company. The company noted the Sept. 30 decision in an SEC filing Monday. (See Avanex Hatchet Swings.)

A small facility, Melbourne is the development home to a business unit Avanex acquired from Essex Corp., which is now a subsidiary of Northrop Grumman Corp. (See Avanex Buys Subsidiary.)

Avenex isn't giving up on the 300-pin transponder and XFP transceiver it picked up in that deal. It's trimming some overhead, though, by moving those products to more populated sites. "We are transitioning them to our sites in France and in Shanghai. We will continue to support those products," Barbarossa says.

Is that the end of site closures? Barbarossa wouldn't say, although he got a chuckle out of the question: "We don't give guidance on shutting down sites."

The answer is probably "no," though, given the sites Avanex has left. "If you look at the strategic position of every site, it's kind of hard to envision shutting down more," Barbarosa concedes.

The table below outlines the logic, as explained to Light Reading by Barbarosa:

Table 1: Avanex's Sites
Location Function and Benefits
Fremont/Newark, Calif. Headquarters and R&D. Gives Avanex a foothold in Cisco territory
Horseheads, N.Y. Amplifiers and dispersion compensators. Small site but considered strategically close to east coast customers such as Nortel and Tellabs
Shanghai, China Originally intended as a product development center, it's become an interface for the Chinese design centers of customers including Alcatel-Lucent
Villebon Sur Yvette, France Transmission products including 40-Gbit/s tunable transponders. A foothold near Alcatel-Lucent's European base.
San Donato, Italy Lithium niobate (LiNbO3) modulators, the one product that Avanex still manufactures itself; originally a Pirelli facility
Bangkok, Thailand Administrative center for much of Avanex's manufacturing. Keeps Avanex near Fabrinet, its manufacturer of choice
Source: Avanex; SEC filings

Barbarossa wouldn't discuss too many details of Avanex's business, as the company is preparing its earnings for the quarter that ended in September. But he did say that transmission products -- transponders and transceivers -- are a key part of the company's plans.

"The major design wins we have in transmission come from France," Barbarossa says, with a nod to Alcatel-Lucent (NYSE: ALU). Much of Avanex's business stems from the acquisition of Alcatel Optronics in 2003, and AlcaLu represented 25 percent of Avanex's sales in fiscal 2008, which ended in June. (See Avanex Deal Reshapes Sector.)

Finding its feet
The Melbourne closing is the latest symptom of Avanex still trying to regain its footing. Times are bad all around in technology, but Avanex seems to be having a particularly rough ride.

Avanex fired CEO Jo Major in July, replacing him with Barbarossa. The company then said its earnings for the quarter that ended in September would be well off the mark predicted by analysts. Finally, Avanex recently underwent a 1-for-15 reverse stock split, a move often made in hopes of getting institutional investors to look at a stock. (See Avanex Axes CEO Jo Major, Avanex Misses Hard, and Avanex Reverse Splits.)

The company reported $208 million in sales for fiscal 2008, which ended in June, compared with $213 million in fiscal 2007.

Taking the reverse split into account, Avanex's stock is down 85 percent compared with a year ago, not all of it attributable to the recent market crash. Competitor Bookham Inc. (Nasdaq: BKHM; London: BHM) is down 68 percent, and Opnext Inc. (Nasdaq: OPXT) is down 74 percent.

— Craig Matsumoto, West Coast Editor, Light Reading

optigong 12/5/2012 | 3:29:58 PM
re: Avanex Shutters a Site pretty sad to see a CEO joke about shutting down sites in the current environment. People just lost their jobs and deserve more respect.

I guess that does it for Avanex. No more attempts to develop transponders.
^Eagle^ 12/5/2012 | 3:29:57 PM
re: Avanex Shutters a Site Please note: France was involved with developing transponders for Avanex LONG before they purchased Essex. Avanex still has plenty of transponder expertise.

Note: I do not work for Avanex NOR do I own any stock. But to suggest that Avanex cannot or could not develop and win business and ship revenue in transponders without Essex is pretty off the mark.

Pete Baldwin 12/5/2012 | 3:29:57 PM
re: Avanex Shutters a Site To be fair, he's not joking about people getting laid off. He's laughing at my question about whether he'll tell me if more sites are closing. (And I deserve it, but you know ... it's a question you gotta ask.)

Transponders and transceivers do seem to be Avanex's best bet for growing top-line revenues, so I do wonder what they've got planned in that area. Maybe they're expecting France and Shanghai to build on what's been done by Essex. We might have a chance to find out more after Avanex announces its earnings.
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